The Currently Not Collectible (CNC) program is an IRS program designed to provide relief from collection activities for taxpayers who would encounter undue financial hardship if they had to pay their tax debt. The IRS requires you to provide information relating to your income, expenses, and assets.
During the period for which the IRS determines that the individual meets the requirements for CNC status (discussed below), it suspends collection activities, including any bank account levies, wage garnishments, or other asset seizures. However, the CNC program only temporarily stops collection activities. It does not erase the taxpayer’s debt. The taxpayer will still be responsible for paying their back taxes if their financial situation improves, including interest and penalties accrued during the suspension period.
Qualifying For Currently Not Collectible Status
Calculating Your Income
In order to qualify for CNC status, you must demonstrate a financial hardship that leaves little or no room to pay your tax debt after you have paid your living expenses. To determine whether you face a financial hardship, the IRS will first calculate all your income, including:
- Wages
- Interest and dividends
- Commissions
- Bonuses
- Self-employment income
- Alimony
Calculating Allowable Living Expenses
The IRS will then determine how much money you are allowed to deduct from your income to pay reasonable living expenses. These are calculated using a combination of national and local standards, updated annually. The following illustrates how allowable living expenses are calculated for a family in Boca Raton.
- Housing and utilities (local standards): The housing and utilities allowance is calculated at the county level. For Palm Beach County, Florida (which includes Boca Raton), the monthly housing and utilities allowance for a family of two is $2,633.
- Healthcare expenses (national standards): The IRS allows you to deduct your health insurance premiums and the greater of your actual out-of-pocket healthcare expenses or the standard amount. For taxpayers under 65, the monthly out-of-pocket healthcare expenses allowance is $84 per person. For those over 65, it is $149 per person.
- Transportation costs (local and national standards): Ownership costs (such as the monthly payment on a car) are calculated using national standards and are $662 per car per month for one car and $1,324 per car per month for two cars. Operating costs (such as gas, repairs, insurance, etc.) are calculated at the metropolitan level. In the Miami metropolitan area (including Boca Raton), this is $400 per month for one car and $800 per month for two cars.
- Food, clothing, and miscellaneous (national standards): For a family of two, the national standard allowance for food, clothing, personal care products, and other miscellaneous expenses (combined) is $1,481 per month.
In addition to the national and local standards, you are permitted to deduct the following items:
- Court-ordered payments such as alimony and child support
- Current monthly taxes, including federal and state income taxes, and FICA taxes
- Term life insurance premiums
Find Out What is Left Over
Once the IRS has subtracted these standard living expenses from your income, any amount remaining is considered to be disposable income, and, therefore, available for making back tax payments. For example, if you have $250 left over per month, the IRS will expect you to pay $250 in a monthly installment plan.
However, if there is nothing left over or your monthly income is equal to your standard allowable living expenses, the IRS may consider you to have a financial hardship and place your account into CNC status.
Important: If the 10-year collection statute expires while you’re in CNC status, you no longer have to pay the back tax debt.
Learn More About Currently Not Collectible Status from East Coast Tax Consulting Group
We’ve provided you with a brief overview of the general requirements individuals must meet in order to qualify for Currently Not Collectible status. The details of your financial situation are likely significantly more complex, and even if you think you might qualify, you must still prove that you qualify to the IRS through extensive financial documentation. To obtain Boca Raton back taxes help, including assistance with CNC status, contact the tax advisors at East Coast Tax Consulting Group by calling 866-550-7655.
FAQs
What exactly does “Currently Not Collectible” status mean?
Currently Not Collectible (CNC) status is an official IRS designation that temporarily halts all collection activity on your tax account. Once granted, the IRS will stop levying your bank
accounts, garnishing your wages, or seizing other assets for as long as your account remains in CNC status.
How does the IRS decide if I qualify for CNC status?
The IRS compares your total monthly income to your allowable monthly living expenses, as calculated under its Collection Financial Standards. If your allowable expenses equal or exceed your income, leaving you with little or no disposable income, the IRS may determine you are in financial hardship and place your account in CNC status.
Does CNC status stop a tax lien from being filed against me?
No. CNC status suspends active collection actions such as levies and garnishments, but it does not prevent the IRS from filing a Notice of Federal Tax Lien, nor does it remove a lien that has already been filed.
What happens to my debt while I am in CNC status?
Your underlying tax debt does not go away while your account is in CNC status. Interest and penalties continue to accrue during the suspension period.
However, there is an important upside: the IRS has a 10-year statute of limitations on tax collection, measured from the date the tax was assessed. If the collection statute expires while your account is in CNC status, the IRS loses its legal authority to collect the remaining balance and the debt is effectively extinguished.